U.S. mortgage applications surged during the first week of July by the most in more than three months as mortgage rates fell, according to a new report.
The Mortgage Bankers Association said its general index of loan demand rose 19.5 percent to 687, the biggest percentage gain since March 12. The purchase index jumped 15 percent to 500.9, close to a record 501.6 in January. The index of mortgage refinancing rose 27.6 percent to 1,769.7, the first increase in three weeks and biggest gain since the week that ended March 12.
Growth in employment combined with interest rates within a percentage point of an all-time low reached last year may continue to support housing demand this year, economists said.
"The interest-rate environment which runs housing is still very strong," said Bob Moulton, president of Americana Mortgage Group Inc. in Manhasset, N.Y. "As interest rates go up, we're hoping hiring continues to go up as well."
Mortgage rates move in step with yields on U.S. Treasury notes, which fell last week after a report Friday showed that the economy in June created fewer jobs than economists had forecast, bolstering speculation that Federal Reserve policy-makers won't need to accelerate the pace of interest-rate increases.
The Federal Open Market Committee at the end of last week increased the benchmark overnight lending rate by a quarter point to 1.25 percent to ward off inflation as the economy expands. While rising mortgage rates may eventually start to limit housing demand in the second half, economists said, a recovering labor market will help limit declines.